Hey Ladies, Want to Dance?

Retirement Three-Step

Photo by  istolethetv

“Let’s go boot scooting,” said one of my best friends as we discussed what we were going to do one Friday night back in college.

“Why?” I asked.

“Because ladies LOVE to dance!” he shot back as he stood up and pretended to do a two-step with an imaginary partner.

This particular friend was a good dancer and he always seemed to have success in meeting the opposite sex. Not only did we go dancing that night, but I signed up for lessons shortly thereafter, as did several of my other buddies.

This came to mind as I read a recent survey by the Transamerica Center for Retirement Studies and the Aegon Center for Longevity and Retirement. In this study, there were several data points that caught my eye.

·         81% of US homemakers are women

·         67% of homemakers are not prepared for retirement

·         89% lack a written retirement plan

It seems, as much as you ladies like dancing, you defer your retirement planning to your partner more often than not. With up to 50% of marriages ending prior to death and longevity statistics suggesting that women will outlive men by an average of almost five years, it is likely that most of you will find yourselves dancing alone at some point before the lights come on. Retirement planning may not be as much fun as a jitterbug, but it is too important not to learn even if you prefer to follow your partner for now.

So what can be done? Here are three steps (pun intended), and none of them require much more effort than an occasional night on the dance floor.

Don’t be a girl interrupted. If you are in a relationship that your partner earns most of the money and has the benefits, it’s important that you understand what those benefits are in case your life is interrupted. How many months of expenses are in your emergency fund, how much disability and life insurance you have, and beneficiary designations on retirement accounts and insurance policies are the first areas to focus on.

Learn as you go. Just as a couple of lessons can make one more willing to get out there and dance, it holds true for finances as well. One relatively easy step to take is to open a Spousal IRA (up to $6500 in 2015), which offers the same benefits as an account in the name of the working partner.

Take control of the entire process, from budgeting to fund the account, where you will open it, and what you will invest in. You will be in a much better state of mind to learn the inevitable lessons than after an unexpected separation or worse.

Diagram your steps. Insist on having a written financial plan. At a minimum, the plan should include a balance sheet detailing your assets and liabilities, a list of your goals, and where you stand in relation to accomplishing your objectives. For example, if junior is going to college in 3 years, estimate how much you need versus what you have earmarked for those costs.

Plans are not set in stone. They are just our best guesses and estimates given the information available today. At least once a year, you should sit down and review the plan and make any necessary revisions.

Let’s go ladies, it’s your lead!

Now What? After The Storm

We were in a drought of historic proportions. Restaurants no longer offered water with meals. Washing a car in the driveway was forbidden. Yards were brown from watering restrictions. Farmers were not allowed to irrigate crops. “Lakefront” homes were now Lake “View” homes, if they were lucky. Some just had a view of weed infested valleys.

Photo by Praveen

Then it rained.

And it rained…

…and it rained…

…and it rained. Baseball games were cancelled. Outdoor weddings were moved inside. BBQ plans and swimming pool openings were postponed.

Then it rained some more. It rained more in May in Austin than it ever had, at least since records have been kept.

Then came the rain bomb. It rained so much in such a short period of time during the Memorial Day weekend that downtown Austin flooded. In nearby Wimberley, tragedy struck when the Blanco River flowed out of its banks during the night leading to over a dozen lives being lost.

Finally the clouds broke and the sun reappeared. Those that were lost were mourned and will be terribly missed. The mud, muck, and debris have been cleaned up and the rebuilding process begun. The grass is now green, the lakes are mostly full, and everyone is talking about how wet this winter may be when El Niño returns.

Sound familiar?

Recently, after months of moving sideways, the storm clouds gathered over the stock market. Greece still owes more than they can repay, the price of oil has plummeted (that’s bad?), and China is figuring out the hard way that markets price assets much more efficiently than governments.

On August 17th, the S&P 500® closed at 2102. Was that thunder in the distance?

On the 18th the index lost about -5 points. A few drops hit the windshield.

Then -17 points down on the 19th. It was time to turn on the wipers.

Another -44 points on the 20th. Wipers on high.

-65 points on the 21st. Started to think about pulling over somewhere.

Then the bottom fell out on Monday, August 25th. Closing down -78 points at 1893, or about 10% below where it started on the 17th.

Why didn’t we stop under that bridge back there!?

It is very normal to wonder when or if it may stop. It is also common to believe that you should have seen it coming, that's just human nature. Fortunately, no injuries have been reported, even though many portfolios have suffered undeniable damage. It's time to be thankful for what you have, hug your loved ones, and start the repairs.

There will be no shortage of pundits claiming to have predicted this all along, or that the worst is yet to come. Just remember that the evidence shows that the vast majority of forecasters that get it right are just lucky. Furthermore, for your long term goals, stocks will earn more than cash or bonds. The trade-off is occasionally dealing with volatility like we've seen recently.

If you can’t stomach the thought of another tempest, perhaps it may be worthwhile to make some changes. You can do that by revisiting your plans, making sure the goals you set out to accomplish are still applicable, then making adjustments as appropriate. Having a good plan includes understanding how volatile markets can be, not taking more risk than you can tolerate, and occasionally re-balancing.

At ATX Portfolio Advisors, we don't try to forecast the ups and downs. We believe in purpose based investing, disciplined asset allocation, and using evidence based investing principles. We also believe in not piling on fees during downturns. If you have questions or would like to discuss your situation, give us a call.